The Kudelski Group, owner of Nagravision, announced its 2011 half year results. Falling USD and EUR exchange rates heavily affected the Group first half results. Compared to the first half 2010, declining exchange rates against the Swiss Franc had a negative impact of CHF 67.0 million on Group’s revenues and CHF 27.4 million on Group’s operating income. Group total revenues in constant currency declined by 8.5%, while reported total revenues dropped by 21.9% compared to the first half of last year, reaching CHF 392.2 million, with the Digital TV segment driving most of the revenue decline.

Total revenues and other operating income for the first half year declined from CHF 517.1 million to CHF 404.5 million.

Strong seasonality expected in 2011 for Digital TV Digital TV revenues declined by CHF 92.1 million to CHF 257.6 million, while operating income declined by CHF 59.8 million to CHF 14.6 million. The strength of the Swiss Franc had a particularly strong negative impact on the Digital TV segment. Currency effects had a negative impact of CHF 46.5 million on segment revenues. While most of the segment revenues are denominated in USD and EUR, a large proportion of Digital TV’s operations are based in Switzerland and as such are denominated in Swiss Francs. Hence, most of the CHF 27.4 million negative currency impact on operating income affects the Digital TV segment. Compared to an exceptionally strong first half 2010, Digital TV constant currency revenues were 13% lower. In the first half 2010, the Group reported an exceptional 21.4% constant currency growth as it posted material revenues from the replacement of the Virgin Media installed base of smart cards. As no such one-off revenues were booked in this first half, the number of smart cards delivered declined by 6.5 million units to 13.9 million.

The European Digital TV business experienced a severe slowdown in the first half year, with a 35.1% reduction of reported revenues to CHF 131.8 million. In constant currency, the revenue decline amounts to 25.2%. The main factor driving the lower revenue base is the base effect from the 2010 Virgin Media swap-out. The Group Italian and Spanish digital terrestrial delivered a particularly strong performance in the first half of last year, both in the core conditional access and in SmarDTV module businesses. In the second half of last year, these sales already materially slowed down and in this first half they remained at roughly the same levels as in the second half 2010. The newly launched German HD+ retail business was a strong contributor to the first half 2010 sales as distribution pipelines were filled to support the launch. As the base effect from the launch ceased, this business generated materially lower revenues in this first half.

Digital TV’s American business maintained a strong momentum with a constant currency growth of 19.7%. Digital TV’s revenues for the region amount to CHF 92.5 million. Once again, Latin American operations represented a particularly strong growth driver. Dish/Echostar-related revenues were lower as the first inactive cards are reaching the minimum period, for which all cards have to pay a service fee, and hence stop paying such fee.

Asian Digital TV revenues for the first half amount to CHF 33.2 million. In constant currency, regional revenues declined by 25.1%, as the system business as well as mobile TV volumes were materially lower than in the previous year.

For 2011, we expect the usual seasonality pattern with a Digital TV second half materially stronger than the first half, contrary to 2010 which had a reverse seasonality.

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